I am still super confused, why would he even say that?

The lead is buried in the article

During the meeting, Putin said he offered Prigozhin the option to allow Wagner fighters to continue to serve in Ukraine under the leadership of their battlefield commander, Andrey Trochev.

“All of them could gather in one place and continue to serve,” Putin told Kolesnikov, who has covered the Kremlin leader for several decades. “And nothing would change for them. They would be led by the same person who had been their actual commander this entire time.”

The offer met with some support from the Wagner commanders, Putin said. “A lot of them nodded their heads when I said this. But Prigozhin, who was sitting in front of them and didn’t see [their reaction], said: ‘No, the guys won’t agree with that decision.’”

The interview appears to be part of a broader effort by the Kremlin to win the loyalty of the Wagner rank and file, even while seeking to discredit Prigozhin by leaking sensitive and embarrassing information about him.

During the interview, Putin also said Wagner did not exist, citing Russian legislation outlawing private military companies and putting its future in doubt.

Dara Massicot, a senior policy researcher at Rand, a US thinktank, who specialises in Russian military strategy, said Putin’s version of events signalled he could outlaw Wagner at any moment while seeking to drive a wedge between Prigozhin and his fighters.

emphasis mine. Now it is kinda a show of weakness. He is having to court the fighters, instead being confident in their loyalty to simple order. However after that explanation it makes sense, more than the headline would first give reason to.